CHINA CONSTRUCTION PEARL RIVER (M) SDN BHD 1. ) INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MALAYSIA) BERHAD 2. ) SEMANGAT GLOBAL SDN. BHD.

CHINA CONSTRUCTION PEARL RIVER (M) SDN BHD 1. ) INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MALAYSIA) BERHAD 2. ) SEMANGAT GLOBAL SDN. BHD.

The Bond, on its proper construction, is an on-demand guarantee payable upon the beneficiary's written assertion of default; however, on the balance of convenience the Plaintiff demonstrated unconscionability by reason of over-securitisation because certified sums and unpaid interim claims produced a net credit in the Plaintiff's favour such that restraint of encashment was justified pending arbitration, therefore an interlocutory injunction restraining pay-out/receipt was granted with costs allocated.

Citation
WA-24C(ARB)-50-09/2021 (Mahkamah Tinggi)
Parties
Plaintiff: China Construction Pearl River (M) Sdn Bhd; First Defendant: Industrial and Commercial Bank of China (Malaysia) Sdn Bhd; Second Defendant: Semangat Global Sdn Bhd
Court
ARB
Jurisdiction
Malaysia
Judgment Date
30 May 2022
Case Number
WA-24C(ARB)-50-09/2021 (Mahkamah Tinggi)
Procedural Posture
Originating Summons (interlocutory Injunction) / Interlocutory Hearing and Decision Pending Arbitration
Outcome
Interlocutory application allowed in part; injunction against encashment/receipt of bond monies granted on balance of convenience.
Legal Topics
Performance Bond, On Demand Guarantee, Unconscionability, Interlocutory Injunction, Over Securitisation, Suspension of Works, Termination, Set Off, Interim Payment Certificates
Source Language
Malay/English
Construction Law Contract Law Banking Law Arbitration Equity Injunctions Performance Bond On Demand Guarantee Unconscionability +6 more

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Parties

China Construction Pearl River (M) Sdn Bhd

Plaintiff

Industrial and Commercial Bank of China (Malaysia) Sdn Bhd

First Defendant

Semangat Global Sdn Bhd

Second Defendant

Procedural Posture

Originating Summons (interlocutory Injunction) / Interlocutory Hearing and Decision Pending Arbitration

Legal Issues

  1. 1 Whether the performance bond is a conditional demand guarantee or an on-demand guarantee
  2. 2 Whether the court should grant an interlocutory injunction restraining pay-out/receipt of the bond pending arbitration
  3. 3 Whether the Second Defendant's demand is unconscionable by reason of unlawful/vexatious termination or over-securitisation

Ratio Decidendi

The Bond, on its proper construction, is an on-demand guarantee payable upon the beneficiary's written assertion of default; however, on the balance of convenience the Plaintiff demonstrated unconscionability by reason of over-securitisation because certified sums and unpaid interim claims produced a net credit in the Plaintiff's favour such that restraint of encashment was justified pending arbitration, therefore an interlocutory injunction restraining pay-out/receipt was granted with costs allocated.

Court Disposition

Interlocutory application allowed in part; injunction against encashment/receipt of bond monies granted on balance of convenience.

Orders

  • Interlocutory injunction restraining the First Defendant from paying out and the Second Defendant from receiving any monies under Performance Bond Ref No LG29501C00000 pending disposal of arbitration between the parties
  • Second Defendant to pay costs of RM5000.00 to the Plaintiff (subject to usual allocator)